Saturday, June 28, 2008

Weekend Edition: Probably Not a ‘Beat-and-Raise’ Month for Obama

The following email arrived this morning, from the Obama campaign:On Monday, everyone will be watching our fundraising totals to see if we can compete with the McCain campaign.This month is the first test of our grassroots fundraising strategy since we declared our independence from the broken campaign finance system….Make a donation of $30 or more by midnight on Monday, June 30th, and show off your support with an Obama logo T-shirt…

This political version of quarter-end discounting—more usually associated with commercial ventures looking to make their numbers than political campaigns—comes on the heels of Obama’s first actual earnings “miss” in its entire, brief history:

Obama Raises $22 Million in May, His Weakest Month This YearAssociated PressJune 20, 2008 10:23 p.m.WASHINGTON -- Democrat Barack Obama raised $22 million in May for his presidential campaign, his weakest fund-raising month this year, and ended the month with $43 million cash on hand, the campaign reported Friday.

—The Wall Street Journal

In Wall Street’s parlance, the Obama campaign “missed the number” in the month of May.

Sure, $22 million in one month is a lot of money, even in Presidential politics. But the Obama campaign’s earnings ‘momentum’ slowed sharply in May: that $22 million was down 29% sequentially from the $31 million raised in April.

More ominously, his campaign spent $26.6 million in May, making it a cash-flow negative month.

No wonder we’re getting t-shirt offers for a month-end donation.

Why does all this possibly matter to a financial observer of the investment scene?

Well, Intrade has buyers willing to pay 65.3 for the right to earn 100 if Obama wins the election. (Intrade is not a bet on the actual voting split: it’s all or nothing, so buyers of Obama at 65.3 would make 50% on their money if he wins.)

McCain, on the other hand, is trading at 30.8.

Meanwhile, our inbox with the t-shirt offer suggests that June will not turn out to be a “beat-and-raise” month for the Obama finance team.

And if "the number" comes in materially worse than expected, we might start to see a bit more of the skepticism already starting to creep into the Obama press coverage. Not to mention the Swift-Boaters that have turned their sites from Hillary to Obama: Michael Bloomberg actually had to publicly deny that Obama is secretly a Muslim.

There’s one more reason we’d bet Obama won’t stay at 65.3 for very long: he’s the front-runner now, and America likes front-runners to earn their place.

So, while we never recommend stocks in these pages, if Obama was a stock, we’d short him right here.

Full disclosure: a family member volunteers for Obama.

But that wouldn’t stop us from shorting now, and covering on the pullback.

The content contained in this blog represents the opinions of Mr. Matthews.Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way. Inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.

12 comments:

The more Obama talks about his tax plans, the less likely it is that anyone who has any significant amount of money will give any to him. Thus, like any good CEO, he will undoubtedly soon learn his lesson and begin "underpromising" (the size of the rate boosts he's salivating to make) until he's elected, at which time he will undoubtedly attempt to start "overdelivering".

2) You don't raise capital gains taxes if you want to encourage investment.

3) You're not "wealthy" if you make $200,000/year and live in New York City; in this case, a marginal tax rate well north of 40% (inclusive of 11% city and state) is already too damn high. Talk to me about a few more points on whatever one earns north of $1 million/year, and I'll listen.

4) The fact that hedge fund managers (sorry Jeff!) get taxed capital gains rates on their carry on money that isn't their own is a joke; there's no question that should be considered "ordinary income".

5) I see nothing "fair" about making home mortgage interest deductible, but THAT will change the day Al Gore starts forecasting a new ice age.

With Obama at 65.3 and McCain at 30.8, then presumably I can go long on each and lock in 3.9% on my investment in 5 months (9.36% annualized). No? That seems a reasonable return on the risk that neither would win the election for whatever reason (Nader, Barr, not being nominated, etc.).